Evaluating the Food and Agriculture Act of 1977 with Firm Quadratic Risk Programming

Federal agricultural commodity programs generally have been assumed to reduce the income risk for farm firms, but limited empirical research exists on this proposition. This paper presents a study of the impact of the Food and Agriculture Act of 1977on income risk for a representative farm in Georgia. The model is used to derive an E-V frontier for a firm not participating in the program and for the same firm that is participating in the program. Results indicate that participation dominates nonparticipation except for higher level of expected net income.